This Week in History:

June 3-9, 1937: FDR's Plan for National Infrastructure Development

June 2012

Franklin Delano Roosevelt

On June 3, 1937, President Franklin Roosevelt recommended to Congress that it pass legislation providing for Federal planning and development of the nation's natural resources, and that this comprehensive effort be coordinated by seven regional authorities. This was not a mere academic proposal for better administration—it was part of Roosevelt's knock-down-drag-out fight in 1937 against the Tory faction, which wanted to stop the New Deal programs and go back to laissez-faire, free trade, and unregulated speculation.

Although Roosevelt had been reelected in 1936 by a large margin, the international speculators and financiers moved quickly to counter the economic programs that were bringing America out of the Great Depression. Roosevelt could see the warning signs early in the year. During a White House press conference on April 2, he announced the fact that the prices of raw materials had gone up too high, threatening the large, long-term infrastructure projects, such as bridges and concrete dams, that the government was building.

Roosevelt particularly cited the price rises in cement, steel, and copper. "I am concerned—we are all concerned—over the price rise in certain materials that go into durable goods primarily. For example, we all know that there are a great many mines in this country—copper mines that can turn out copper at a profit at five and six cents. Even the high-priced mines, like Anaconda, can probably make a profit at eight and nine cents. Yet today copper is selling at 17 cents or more, pushing up thereby the prices of all kinds of articles into which copper enters, and of course it does enter into a very, very large field of articles of all kinds."

Roosevelt also cited the $6 a ton increase in steel prices. When asked by the press if the price increases were far above what they should have been, Roosevelt answered: "I think that the price increase of ordinary steel was much larger than was justified by the increase in the pay of the workers; it was probably somewhere between twice and three times the amount that went to the workers."

Compounding the problem that massive profit-taking and speculation on raw materials was driving up the cost of building needed infrastructure, was the fact that Treasury Secretary Morgenthau was pressuring Roosevelt to cut funds to the Public Works Administration. Morgenthau justified the cuts by pointing to the industrial production index published by the New York Times, which had risen to 110, and therefore supposedly indicated that large infrastructural projects were no longer needed. He was wrong, and the cuts resulted in an economic collapse and spiraling unemployment.

The opposition to the New Deal, an opposition of such ferocity that it would even wittingly cause another collapse, was made up of oligarchical interests who knew Roosevelt's policies were the death knell of their beloved feudal system. One Roosevelt thrust that drove them to frenzy was his May 24, 1937 proposal for legislation establishing minimum wages and maximum hours.

In his proposal to Congress, Roosevelt wrote that "to protect the fundamental interests of free labor and a free people we propose that only goods which have been produced under conditions which meet the minimum standards of free labor shall be admitted to interstate commerce. Goods produced under conditions which do not meet rudimentary standards of decency should be regarded as contraband and ought not to be allowed to pollute the channels of interstate trade."

One of the rudimentary standards of decency involved not using child labor. In 1918, the Supreme Court, with Justice Oliver Wendell Holmes writing the dissenting opinion, had invalidated a statute prohibiting the interstate shipment of goods made by child labor, under conditions considered sub-standard by the Congress of that day. As Roosevelt later wrote, it was not until 1941 that the Supreme Court overturned that decision. "It has established the power of the Congress to outlaw child labor and the chiseling of workers' wages, and the stretching of workers' hours beyond modern American standards.

"There has been established at last the definite principle, which is essential to any self-respecting democracy, that the Congress has the right to impose decent standards of wages and hours in any factory which manufactures merchandise passing through the channels of commerce from one State to another. In this way, backward States, which are willing to permit their children to work instead of going to school, and are willing to subject helpless labor to intolerable working hours and starvation wages, will not be permitted to send their merchandise into other more enlightened States, which are willing to respect the minimum standards of a free laboring class."

Just ten days after he asked Congress for minimum-wage legislation, Roosevelt submitted his plan for creating seven regional authorities which would report to the Federal Government on maintaining and expanding the nation's natural resources, a mandate which included flood control, forest management, the prevention of erosion, and hydro-electric projects. The President particularly stated that, "The water-power resources of the nation must be protected from private monopoly and used for the benefit of the people."

The seven regional authorities listed were, first, "the Atlantic Seaboard; a second for the Great Lakes and Ohio Valley; a third for the drainage basin of the Tennessee and Cumberland Rivers; a fourth embracing the drainage basins of the Missouri River and the Red River of the North; a fifth embracing the drainage basins of the Arkansas, Red and Rio Grande Rivers; a sixth for the basins of the Colorado River and rivers flowing into the Pacific, south of the California-Oregon line; and a seventh for the Columbia River Basin."

As Roosevelt wrote in November of the same year, "We have reached a stage in the depletion of our natural resources where we should allot a definite portion of each year's budget to this work of husbandry. Our present machinery for carrying out such purposes, however, is geared to methods of which the rivers-and-harbors legislation of many years ago is an example. We spend sporadically—on a project here and a project there—determined upon without relation to the needs of other localities, without relation to possibly more important needs of the same locality, and without relation to the national employment situation or the Federal Budget.

To avoid waste and to give the nation its money's worth from the national funds we expend, we must, like any business corporation, have a definite building and operating plan worked out ahead of time—a planned order in which to make expenditures so that we may keep our working force employed, and a planned coordinated use of the projects after completion. And because relative values of local projects should be appraised before they come to Washington, first by those with local knowledge, and then by regional conferences, we must have some kind of local and regional planning machinery and coordination to get full value out of the final appropriations authorized in Washington—money value and human value."

Library of Congress

David E. Lillienthal before a Senate committee in 1937.

At the end of his message to Congress, Roosevelt stated that, "For nearly a year, I have studied this great subject intensively and have discussed it with many of the members of the Senate and the House of Representatives." The shining example of such comprehensive planning was the TVA, yet its very success had made powerful enemies. One of them was a committee chairman from the South who lobbied for the dismissal of TVA director David Lillienthal, because he had had the temerity to allow a black woman to take a government test for a TVA clerical position.

Roosevelt assured the chairman that Lillienthal had done such a good job that he would be most happy to name him head of the Columbia River Basin Authority, thus removing him from the TVA. The catch was that Congress would have to vote out the funding for the Columbia River project to make this possible. The chairman was unmoved, and the feudalist Liberty League's well-financed propaganda against so-called "socialist planning" succeeded in stopping Roosevelt's comprehensive resource development program.

The original article was published in the EIR Online’s Electronic Intelligence Weekly, as part of an ongoing series on history, with a special emphasis on American history. We are reprinting and updating these articles now to assist our readers in understanding of the American System of Economy.

Thank you for supporting the Schiller Institute. Your contributions enable us to publish, sponsor conferences, and support other activities which are critical interventions into the policy making and cultural life of the nation and the world.